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China’s 2015 Foreign M&A Reached $110b

This past summer, as China’s stock market tanked and its economy slowed, Chinese central bankers responded by trying to prevent capital flight. They tightened currency controls and devalued their currency to make Chinese goods more attractive overseas.

Despite those currency controls, recently released data indicates that throughout 2015 China’s billionaires and their corporations were on a major overseas shopping spree that got their cash out of the mainland and put it to work around the world. This outflow of Chinese capital has been going on for years, but it has come under increased scrutiny as China’s markets become increasingly volatile. Still, some signs indicate it has accelerated and remains a robust global diversification for the world’s second-largest economy, CBS reported.

“Last year the Chinese set a record by spending $110.3 billion in overseas mergers and acquisitions, an 85.8% jump from the year before,” said Tom Cane, with Mergermarket Group, a financial information and research firm that tracks mergers and acquisitions worldwide.

“And from the information we have from our sources in China, the pace is not going to slow down as the Chinese press on with the global acquisition hunt,” Cane told CBS MoneyWatch. He said Chinese investors were particularly active in the overseas energy, mining and utilities sectors in 2015, where they spent $48.5 billion to close over a hundred deals.

Strategic Aim

Cane said Chinese deals in sectors such as industrial products, chemicals and technology aren’t only about earning a rate of return in the short run but also are aimed to strategically give Chinese companies access to the latest technology so China can upgrade its industries and become more self-reliant.

“By 2025 the Xi Jinping administration is targeting that 70% of the core components used to make products in critical sectors like information technology, aerospace and power equipment be made in China,” he explained.

An example of such a strategic move was last year’s decision by state-backed Tsinghua Holdings to buy a stake in Western Digital, the US data storage company. Under federal law, the Committee of Foreign Investment in the US has to vet deals that involve foreign companies buying American companies to see if the tie-ups create potential negative consequences for national security.

China Daily puts the total for China’s foreign M&A at $111.9 billion in 2015, the sixth consecutive record year. Europe was the top region for Chinese merger and acquisition activity last year.